Tenet Healthcare (THC) to Divest Hospitals for $1.1 Billion

·3 min read

Tenet Healthcare Corporation THC recently inked a partnership deal with Steward Health Care System, LC to divest its five hospitals and related operations in the Miami-Dade and Southern Broward counties. Per the terms of the deal, the company will get $1.1 billion for this sale. The transaction is expected to close in the third quarter of 2021.

The five Florida hospitals included in the sale are Coral Gables Hospital, Florida Medical Center in Lauderdale Lakes, Hialeah Hospital, North Shore Medical Center in Miami and Palmetto General Hospital in Hialeah.

Per the terms of the deal, Tenet’s Conifer Health Solutions subsidiary will continue to provide revenue cycle management services to these five hospitals post the sale. The hospital company’s ambulatory facilities, run by United Surgical Partners International, in the aforementioned markets are not included in the divestiture.

Notably, closure of this deal will help Steward Health further penetrate in the Florida region. The deal will bring its total hospital count to 44 across the world.

Rationale Behind the Deal

Tenet Healthcare is focused on divesting its non-core and unprofitable business units to repay its debt and maintain financial liquidity. The company exited the first quarter of 2021 with $15 billion of long-term debt, down 3% from the level at 2020 end. The latest move is in line with its strategy of business rejig.

The company’s strategic priorities include completing hospital divestitures and allocating capital to higher return on investments across its capital structure.

The spin-off of its Conifer business into an independent publicly-traded unit is expected to close by the end of 2021. The company is likely to reduce its debt burden by using the proceeds from the above-mentioned transaction.

In April, this presently Zacks Rank #3 (Hold) company completed the sale of its urgent care platform for a valuation of $80 million. The divestment includes the sale of 87 CareSpot and MedPost centers, previously managed by Tenet Healthcare’s United Surgical Partners International (USPI) subsidiary.

These divestitures will help Tenet Healthcare focus on its core operations and aid the stock to continue its rally.

Price Performance

Shares of Tenet Healthcare have soared 212.2% in the past year, outperforming its industry’s increase of 101.2%. This solid upside was primarily driven by the company’s strong fundamentals like alliances, acquisitions and divestitures of its non-core business units. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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The price performance looks stellar when compared to other stocks in the same space like HCA Healthcare, Inc. HCA, Universal Health Services, Inc. UHS and MEDNAX, Inc. MD, which too have rallied 106.6%, 57.7% and 75.8%, respectively, in the same time frame.

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